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Simon Property (SPG) Q2 Result Solid, View and Dividend Up

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Simon Property Group, Inc. (SPG - Free Report) , a retail real estate investment trust (REIT), reported second-quarter 2017 funds from operations (“FFO”) of $2.47 per share, which surpassed the Zacks Consensus Estimate of $2.44. However, the FFO figure came in lower than $2.63 per share reported in the prior-year quarter.

Results highlight improved property performance and growth in revenues. The company also raised its full-year outlook and announced a hike in quarterly dividend. Reflecting upbeat sentiments, the stock was up over 4% in pre-market trading.

During the quarter, the company posted revenues of $1.36 billion, which beat the Zacks Consensus Estimate of $1.33 billion. The figure compared favorably with the year-ago figure of $1.32 billion.

Simon Property Group, Inc. Price, Consensus and EPS Surprise
 

Simon Property Group, Inc. Price, Consensus and EPS Surprise | Simon Property Group, Inc. Quote

Note: The EPS numbers presented in the above chart represent funds from operations (“FFO”) per share.

Quarter in Detail

For the U.S. Malls and Premium Outlets portfolio, occupancy was 95.2% as of Jun 2017. Base minimum rent per square feet rose 3.3% year over year to 52.10 as of Jun 30, 2017. Further, leasing spread per square foot for the trailing 12-month period ended Jun 30, 2017, increased 12.9% to $8.13.

Total portfolio net operating income (“NOI”) growth for the quarter was 5.0%. Moreover, comparable property NOI growth for the same period came in at 4.4%.

At the end of the quarter, Simon Property had redevelopment and expansion projects in progress at 25 properties across the U.S. and Canada.

The company exited the second quarter with cash and cash equivalents of $488.6 million compared with $560.1 million at the prior-year end.

Additionally, as of Jun 30, 2017, Simon had around $6.5 billion of liquidity. This comprised cash on hand, including its share of joint-venture cash, and available capacity under its revolving credit facilities.

Moreover, during the quarter, the company repurchased over 1.5 million shares of its common stock.

2017 Outlook Raised

Simon Property raised its full-year 2017 FFO per share guidance and projects it to be in the range of $11.14–$11.22. This marks a 4 cent per share increase from the mid-point of the prior guidance range, after taking into consideration the 36 cents per share charge on the extinguishment of debt. Currently, the Zacks Consensus Estimate for 2017 FFO is $11.19 per share.

Dividend Hike

Simon Property announced a quarterly dividend of $1.80 per share, marking an increase of 2.9% sequentially and 9.1% year over year. The new dividend will be paid on Aug 31 to stockholders of record on Aug 17, 2017.

Our Viewpoint

We are encouraged with the better-than-expected performance of Simon Property. Moving ahead, the company’s diversified exposure to retail assets in the U.S. and abroad, efforts to support omni-channel retailing, portfolio-restructuring initiatives and healthy balance sheet augur well. However, a large development pipeline increases the company’s operational risks, while stiff competition from online sales and rise in interest rate pose challenges.

Currently, Simon Property carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Let us now look forward to the earnings releases of other retail REITs like GGP Inc. (GGP - Free Report) , Federal Realty Investment Trust (FRT - Free Report) and The Macerich Company (MAC - Free Report) , all of which are expected to report quarterly figures on Aug 2.

Note:  FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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